Health care is a perennial problem that needs an innovative solution. While one may disagree with Mitt Romney's attempt to increase insurance coverage, the latest push for reform is a step in the right direction.
With over a half million uninsured Massachusetts residents and premiums heading still farther north due to malpractice suits and rising industry costs, significant change is necessary.
The population of Massachusetts and the entire country is rapidly aging, and the first baby boomers turned 60 this year. With a bulge in the age curve approaching retirement and the accompanying health problems, the entire industry faces a surge in activity.
Health care has always been a subject of great concern, and it is unlikely that the proposed plan will provide a permanent solution. Still, any logical plan which proposes universal health care should be pursued.
Market-oriented reforms have the potential to both reduce the cumbersome oversight of a federal agency as well as invigorate the industry. With workers able to contribute a portion of their pre-tax wages towards premiums, there is every incentive to purchase some minimum level of care, particularly when combined with tax benefits.
Romney proposes a system that is not far removed from current defined contribution type retirement plans. Though IRAs are perceived as cryptic and are blamed as a source of poverty among the elderly with declining savings rates, they are the type of state-structured incentives which encourage individual responsibility.
There is little hope for success in a state-sponsored program, and the best solution for a market economy is to provide economic incentives for rational actors. If individuals are able to pay for their insurance with untaxed wages, there is certainly going to be an increase in enrollment.
One of the most important problems facing insurance providers is the question of adverse selection. As insurers can't make perfectly accurate decisions about the health and likely cost of individuals, they rely on actuarial tables to determine eventualities.
Prices are then skewed upwards, since individuals who know they are more likely to get sick will be more likely to purchase insurance.
With everyone purchasing insurance, not only will premiums decline thanks to volume and economies of scale, but there will likely be a downward effect on price from the increased number of lower cost patients. Though one could imagine instances of moral hazard - changing behavior due to owning insurance - it is unlikely that individuals would be increasingly reckless with their own health and bodies.
Furthermore, a wave of new capital will soak the industry and allow for great improvements. While the United States has always been a source of medical innovation and technology, this is typically only available to the elite few. With additional money, hospitals and doctors will be able to democratize these techniques.
The proposed bill is similar to the kind of soft paternalism which has been gaining strength elsewhere in the world. It makes far more sense for individuals to be encouraged into beneficial behavior rather than forced to do so. The best way to allow for universal health care is to make it cost effective.
